Securitisation volumes has likely grown by 45 per cent to around Rs 25,000 crore in the second quarter of the current fiscal, says a report.
They are originated largely by non-banking financial companies (NBFCs) and housing finance companies (HFCs),
In the first quarter of fiscal 2022, the volumes stood at Rs 17,200 crore and were at Rs 15,200 crore in the second quarter of the previous fiscal, domestic rating agency Icra said in a report.
Securitisation is the process of pooling and repackaging homogenous illiquid financial assets into marketable securities that can be sold to investors.
The agency’s Vice President and Group Head (Structured Finance Ratings) Abhishek Dafria said after reaching close to pre-Covid levels in the last quarter of the financial year 2020-21, securitisation volumes had again dipped in the first quarter in this fiscal on account of the second wave of the pandemic.
“As the country opened, June saw a resurgence in securitisation, and the momentum continued into Q2. The volumes for the quarter were marginally impacted due to new securitisation guidelines introduced by the Reserve Bank of India on September 24, 2021, as some market participants preferred to put transactions on hold until they were well-versed with the new regulations,” Dafria said.
He said the new guidelines will have a positive impact in the long term in terms of widening the securitisation market.
The last month of the quarter contributed to bulk of the securitisation volumes with around 60 per cent of the quarterly transactions (by volume) being placed in September 2021, the agency said.
Despite the second wave of the pandemic, the securitisation volumes in the current fiscal have been higher than the corresponding period of last year, i.e. around Rs 42,200 crore in H1 of the financial year 2021-22 versus Rs 22,700 crore in H1 the financial year 2020-21, it said.
The agency estimates the annual securitisation volumes to reach about Rs 1.2 lakh crore for the financial year 2021-22, which would imply at around 40 per cent increase from the volumes seen in the financial year 2020-21.
“Assuming the retail credit quality holds and is not impacted by any further resurgence of Covid infections, we expect the securitisation volumes in the second half of the fiscal to be significantly higher than the first half,” Dafria said.
Traditionally, securitisation through Direct Assignment (DA) transactions (bilateral assignment of the pool of retail loans from one entity to another has accounted for about two-thirds of total volumes, the report said.
The balance one-thirds share is accounted for by Pass-Through Certificate (PTC) transactions (loans are sold to an SPV which issues PTCs), it said.
In the first quarter of the financial year 2021-22, PTC volumes were higher at close to 50 per cent which is attributable to the fact that PTC transactions have credit enhancement in form of subordination and credit collaterals unlike DA transactions which do not have any credit enhancement, the report said.
The Q2 of the financial year 2021-22 again witnessed a rise in the share of DA to about two-thirds of the total volumes, it said